As of August 2020, India was home to 17.7% of the world’s population (1.32 billion people to be more specific), coming an in-depth second to China’s 1.39 billion people. The Asian country that has produced a number of the world’s wealthiest tycoons doesn’t recoil from leveraging on new technology to manoeuvre its 24-hour economy.
India was also one among the earliest countries to embrace cryptocurrencies and blockchain, where a report by Dappros in 2018 showed that the country had a record 12,509 blockchain developers. However, in April 2018, the Federal Reserve Bank of India (RBI) shocked the nation’s thriving crypto ecosystem with a sudden ban on crypto trading.
The ban spelt doom for over 5 million crypto enthusiasts at the time and began a posh tug of war between them and therefore the government. Fast forward to March 2020 and therefore the country’s Supreme Court lifted the ban on crypto trading, which has since put India back on the list of the country’s with the fastest-growing crypto economy.
So, why is that there such a sophisticated crypto market in India? Is India ready for double-digit growth in crypto-related activities? Why is the RBI hell-bent on criminalizing crypto trading within the country? Let’s dive deep into India’s crypto industry and determine what the longer term holds for the economic powerhouse when it involves blockchain.
India’s Crypto Ban
In a statement released on 5th April 2018, India’s monetary regulator, the Federal Reserve Bank of India (RBI), banned the buying or selling of cryptocurrencies in India. The handout read,
“In view of the associated risks, it’s been decided that, with immediate effect, entities regulated by RBI shall not affect or provide services to a person or business entities handling or settling [virtual currencies].”
Before the ban, Bitcoin was trading at 20% above the international price since the demand for the cryptocurrency was quite the availability. The country had over 11 active trading crypto exchanges including WazirX and ZebPay with $3.2 million changing hands within the country’s peer to see trading platforms.
Following the ban, several crypto-related bodies filed a petition with the country’s supreme court challenging the ban. Key among them was Kali Digital Systems, who engaged Khaitan & Co. firm who in their filings stated,
“The circular appears to be arbitrary and unconstitutional since it doesn’t give strong facts on why RBI is against the business of cryptocurrencies. Logical and well-thought argument backed by solid facts is that the primary requirements under the constitution to place a stop to any business in India.”
Also, top crypto trading exchanges within the country, like Zebpay, announced that they were shutting down thanks to the hostile crypto trading conditions in India. When announcing this decision, the exchange stated,
“The curb on bank accounts has crippled our, and our customer’s, ability to transact business meaningfully. At now, we are unable to seek out an inexpensive thanks to conducting the cryptocurrency exchange business.”
RBI Lifts Ban on Crypto Trading in India
In January, the Supreme Court in India listened to a 2-week status hearing by the general public and industry-led petitioners challenging the RBI crypto ban. After deliberation and delays, the court finally ruled that the RBI ban should be lifted, terming it ‘disproportionate’.
An intervention by the web & Mobile Association of India (IAMAI) had tons to try to to with the landmark ruling that has brought life back to India’s crypto market. Other notable names that played a huge role within the overturning of the ban were Binance crypto exchange that acquired India’s Wazirx crypto trading platform in 2019.
A few days after the ruling, there was information emerging that the country’s financial institution was getting to appeal and ask the Supreme Court to review their stand. However, since the historic ruling, crypto-related activities have spiked. a number one crypto exchange, OKEx, recently launched within the country.
While responding in an interview about the lifting of the ban, Tim Draper, a billionaire speculator curious about tapping into India’s colossal crypto market potential, commented,
“The Supreme Court of India and therefore the Indian government have shown that the simplest ideas ultimately prevail, and just in time because the advantages of Bitcoin and crypto over current systems will become apparent during this crisis.”
What drives crypto adoption in India?
Despite the complex crypto climate in India, there’s still tons of hope and potential regarding digital currencies in India. A recent survey by OKEx and Coinpaprika identified the subsequent two primary reasons why there’s a thriving crypto environment in India:
High remittance demand
India features a population outflow of over 17 million immigrants who are always remitting money to their families back home. Remittance fees all around the world are incredibly high, with India incurring $ 5.67 billion in costs in 2019. the utilization of Bitcoin and other cryptocurrencies acts as an inexpensive and fast cross remittance method, which has massive potential for growth in India.
Conversion of India Rupee into a stable fiat
Indians love shopping on e-commerce sites like Amazon and Netflix. The country’s Rupee is usually fluctuating, which makes Indians want to conserve their money in US dollars. However, the country has rigid forex regulations, which makes it challenging to convert the Rupee into USD. to satisfy the demand for Rupee conversion, people are turning to C2C crypto platforms, which are fast and efficient.
The Current Crypto Climate in India
There’s still tons of uncertainty about the regulation of cryptocurrencies by the Indian government. Recently, a publication revealed that the policymakers were actively performing on presenting a bill to the country’s parliament that looked to ban crypto trading. consistent with the report, an unidentified government official stated,
“We are performing on it. After inter-ministerial consultations, it (the note) would be presented to the cupboard for approval. Once Parliament resumes for the session, we hope to urge it ratified,”
Meanwhile, the top of research at Blockchain.com, Garrick Hileman, stated in an interview that Indian banks were showing a growing interest in cryptocurrencies, but were quite sceptical thanks to regulatory uncertainty. Also, several crypto exchanges have written to the country’s financial institution to hunt clarification on whether or not they are taxed as a commodity, currency, service, or goods supported the GST framework.
Recently, a former Finance Secretary who played a substantial role in drafting the bill to ban cryptocurrencies in India engaged industry leaders on a discussion on digital assets. the previous official, Subhash Chandra Garg, engaged a panel where he stated,
“The way cryptocurrency works is on the distributed ledger technology. It’s a high investment technology. It can never be a standard man’s currency.”
In QI of 2020, the number of registered users from India on the OKEx crypto exchange rose by 4100%. The staggering figures indicate a high appetite for crypto by Indians looking to diversify their asset portfolios by investing in digital assets.
Increased Crypto Scams in India
A recent report by Microsoft revealed that India experienced crypto-jacking incidents that were five times above the worldwide average. There’s also a spike within the number of made crypto holders in India who are falling prey to fake wallets. Manan Shah, the CEO of Avalance Global Solutions, stated,
“I have seen numerous wealthy Indians falling into the trap of such fake cryptocurrency wallets within the recent past. One gentleman just came to me who lost $50,000 (over Rs 37 lakh) while handling one such fake platform.”
Sumit Gupta, the CEO of the CoinDCX crypto exchange, acknowledged that hackers and scammers were getting more sophisticated, and users needed to stay to basic security principles when handling virtual currencies.
The Future of Crypto in India
Despite the uncertainty of the regulation of cryptocurrencies by the Indian government, there’s an increasing growth within the adoption of virtual currencies within the country. The country’s Prime Minister, Narendra Modi, recently endorsed blockchain, terming it as an ‘opportunity for frontier technology.’
Despite the lifting of the ban on crypto trading earlier within the year, India still features a great distance when it involves full-scale crypto education, but which will likely come given time. Until then, unless the ban is reversed, the complex Indian crypto market should still thrive and flourish.